Stock
Market

The Stock
Market

What is the
stock market? The stock market is a marketplace where buyers
and sellers meet. The item that is being sold is a piece of
paper which represents ownership in a company. Professional
stock traders see the stock market as nothing more than
letters and numbers changing rapidly. My definition of a
stock is four letters (in the NASDAQ stock market) followed
by a number. The four letters being the ticker symbol which
remains the same (it does not change unless the exchange
removes it from being listed) and the number being the price
per one share (unit) of that stock. The price (the number)
will dynamically fluctuate during trading hours in direct
relationship to … SUPPLY and DEMAND.

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The Exchange
Market is a place where buyers and sellers come together to
trade. The best known and largest exchange is the New York
Stock Exchange (NYSE). The NYSE is a large room with many
trading posts where trades take place. Each post has a
specialist who handles specific securities. He can act as a
broker's broker and make commissions on the trades, or he
can buy and sell out of his own account, hence, creating a
market in that specific security. The NYSE is not directly
involved in the actual transactions (trades) but acts as a
police officer enforcing certain rules to ensure fairness.

The New York
Stock Exchange sets the policies of rules and regulations
and decides which stocks are eligible for listing, and which
firms can become members of the exchange. The NYSE approves
specialists as well. There are many restrictions on the
specialists in order to make a fair marketplace.

Over The
Counter Stock Market Trading – NASDAQ

The NASDAQ is
different from the New York Stock Exchange because the
NASDAQ exchange has no physical location nor trading posts.
This exchange is 100% electronic and the specialist here is
replaced with Market Makers (MM.) These Market Makers are
individual firms willing to make a market. The Market Maker
is similar to a specialist on the NYSE, but he acts as a
dealer, not as a broker. In general, the Market Maker has a
position in a particular stock and sells out of his own
inventory. Market Makers make their money from a markup or
markdown rather than from commissions. The Market Maker
regularly publishes Bid and offer quotes and is ready to buy
or sell the stock at the quoted prices. These quotes can be
seen on a Level II screen.

Stock
Investment and Stock Trading Objectives

It is important
to determine your stock investment and stock trading
objectives as it varies for each individual. The objectives
of a married 28 year old with a newborn baby are totally
different than the objectives of a 50 year old looking to
retire and, of course, both are totally different than the
objectives of a 23 year old who is single. It is important
to define the financial responsibilities one has in order to
better manage his/her money. Before you start investing in
the stock market, write down your objectives and goals as an
investor along with your present and future financial
responsibilities.

All of the content published on
this website is to be used for informational purposes only
and without warranty of any kind. The materials and
information in this website are not, and should not be
construed as an offer to buy or sell any of the securities
named in these materials. Trading of securities may not be
suitable for all users of this information.